Executive Summary:
This circular informs Authorised Dealer Category I (AD Category I) banks about the Government of India-supported Line of Credit (LoC) of USD 4.50 billion from Exim Bank to the Government of Bangladesh for financing social and infrastructure development projects and consultancy services. The agreement is effective from February 26, 2018, with a terminal utilization period of 60 months after each project's completion date. It clarifies export guidelines, agency commission rules, and directs AD Category I banks to inform their exporter clients.
Key Points / Main Content:
Line of Credit Details:
* Exim Bank has an agreement with the Government of Bangladesh for a USD 4.50 billion LoC.
* The LoC is for financing social and infrastructure development projects and consultancy services in Bangladesh.
Export Eligibility and Conditions:
* Eligible goods and services must comply with India's Foreign Trade Policy.
* Minimum 75% of the contract price goods and services must be supplied from India.
* Up to 25% of goods and services may be procured from outside India.
* For civil construction projects, the Indian supply can be reduced to 65%, with further reductions considered by EXIM Bank on a case-by-case basis, provided sourcing is not from a third country.
Operational Guidelines:
* The LoC agreement is effective from February 26, 2018.
* The terminal utilization period is 60 months after the scheduled completion date of each project.
* Shipments under the LoC must be declared on the Export Declaration Form as per RBI instructions.
* No agency commission is payable under the LoC, but exporters can use their own resources or EEFC accounts for commission payments.
AD Category I Bank Responsibilities:
* AD Category I banks can allow remittance after realization of full eligible value of export, subject to extant instructions for payment of agency commission.
* AD Category I banks must inform their exporter constituents about the LoC details.
Impact Analysis:
AD Category I Banks:
* Impact: Need to understand the guidelines related to the LoC and its implications for export financing.
* Action Required: Inform exporter constituents about the LoC details and ensure compliance with the specified guidelines for export declarations and commission payments.
Indian Exporters:
* Impact: Potential to access financing for exports to Bangladesh under the LoC, subject to meeting eligibility criteria.
* Action Required: Obtain full details of the LoC from Exim Bank and comply with the export conditions, including declaration requirements and sourcing percentages.
Exim Bank:
* Impact: Responsible for managing the Line of Credit and ensuring compliance with the agreement terms.
* Action Required: Provide information and guidance to exporters and AD Category I banks regarding the LoC.
Key Entities Referenced
Reserve Bank of India: The central bank of India, responsible for regulating the banking system and managing the country's monetary policy.
Mumbai, Maharashtra: The city where the Reserve Bank of India is located.
Export-Import Bank of India (Exim Bank): An Indian financial institution that facilitates and promotes foreign trade of India.
Government of the Peoples Republic of Bangladesh: The recipient of a Line of Credit from Exim Bank, supported by the Government of India.
Line of Credit (LoC) of USD 4.50 billion: A credit facility extended by Exim Bank to the Government of the Peoples Republic of Bangladesh for financing developmental projects.
Foreign Trade Policy of the Government of India: The set of guidelines and regulations governing the import and export of goods and services in India.
Foreign Exchange Management Act (FEMA), 1999: An Act of the Parliament of India to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India.
R K Moolchandani: Chief General Manager at Reserve Bank of India
RESERVE BANK OF INDIA
________________________________Mumbai – 400 001______________________________
RBI/2017-18/149
A.P. (DIR Series) Circular No.21 April 5, 2018
All Category – I Authorised Dealer Banks
Madam/Sir
Exim Bank's Government of India supported Line of Credit of USD 4.50 billion to the
Government of the People’s Republic of Bangladesh
Export-Import Bank of India (Exim Bank) has entered into an agreement dated October 04, 2017
with the Government of the People’s Republic of Bangladesh (the borrower) for making
available to the latter, a Government of India supported Line of Credit (LOC) of USD 4.50 billion
(USD Four Billion and Five Hundred Million only) for financing various social and infrastructure
developmental projects in the borrower’s country and consultancy services to be exported from
India to the borrower’s country. Under the arrangement, financing export of eligible goods and
services from India would be allowed which are eligible for export under the Foreign Trade
Policy of the Government of India and whose purchase may be agreed to be financed by the
Exim Bank under this agreement. The goods include plant, machinery and equipment and
services include consultancy services. Out of the total credit by Exim Bank under this
agreement, goods and services of the value of at least 75 per cent of the contract price shall be
supplied by the seller from India and the remaining 25 per cent of goods and services may be
procured by the seller for the purpose of the eligible contract from outside India; Provided that
in case of projects involving civil construction, the eligible goods upto the contract price to be
supplied by the seller from Indian may be further reduced from 75 percent to 65 percent and
further reduction can be considered on a case to case basis by EXIM Bank, provided the
sourcing is not from a third country.2. The Agreement under the LoC is effective from February 26, 2018. Under the LoC, the
terminal utilization period is 60 months after the scheduled completion date of the respective
project.
3. Shipments under the LoC will have to be declared on Export Declaration Form as per
instructions issued by Reserve Bank from time to time.
4. No agency commission is payable for export under the above LoC. However, if required, the
exporter may use its own resources or utilize balances in its Exchange Earners’ Foreign Currency
Account for payment of commission in free foreign exchange. Authorised Dealer Category- I (AD
Category- I) banks may allow such remittance after realization of full eligible value of export
subject to compliance with the extant instructions for payment of agency commission.
5. AD Category – I banks may bring the contents of this circular to the notice of their exporter
constituents and advise them to obtain full details of the LoC from the Exim Bank’s office at
Centre One, Floor 21, World Trade Centre Complex, Cuffe Parade, Mumbai 400 005 or from
their website www.eximbankindia.in
6. The directions contained in this circular have been issued under section 10(4) and 11(1) of
the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to
permissions/ approvals, if any, required under any other law.
Yours faithfully
R K Moolchandani
Chief General Manager